GST Ruling: Gujarat State Entities Related Persons, Notional Processing Fees Exempt

The Authority for Advance Ruling, Gujarat, ruled that M/s. Gujarat State Financial Services Ltd and other Gujarat State owned entities are related persons under the GST Acts due to the State Government's shareholding. Additionally, GST will not be chargeable on notional processing fees provided by GSFS to Gujarat state owned entities as the consideration is solely based on interest, falling under exemptions for such services from GST.

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Issues:
1. Whether all Gujarat State owned entities and GSFS become related persons in GSTRs.
2. Whether GST will be chargeable on notional processing fees provided by way of loans to Gujarat state owned entitiesRs.

Issue 1:
The case involves M/s. Gujarat State Financial Services Ltd (GSFS), a subsidiary of the Government of Gujarat, providing financial assistance in the form of loans to various state-owned entities. The question is whether all Gujarat State owned entities and GSFS become related persons in GST. The applicant argued that as per the definition of related persons in the CGST Act, GSFS and other Gujarat State Government entities are related persons due to the State Government holding more than 25% of outstanding voting stock or shares of both entities. The Authority agreed with the applicant's interpretation, ruling that the relationship between GSFS and Government entities qualifies as that of related persons under the GST Acts.

Issue 2:
The second issue pertains to whether GST will be chargeable on notional processing fees provided by way of loans to Gujarat state owned entities. The applicant clarified that they do not charge any processing fees or other charges for providing financial assistance to Government entities, with interest being the sole consideration. The Authority examined the relevant notifications and found that services by way of extending deposits, loans, or advances, where the consideration is represented by interest, are exempt from GST. Since the applicant only charges interest and no additional fees, they fall under the exemption provided by the notifications. Therefore, the Authority ruled that GST will not be chargeable on notional processing fees or any other charges provided by GSFS in the form of loans to Gujarat state owned entities.

In conclusion, the Authority for Advance Ruling, Gujarat, addressed the issues raised by M/s. Gujarat State Financial Services Ltd regarding related party status and GST applicability on notional processing fees. The judgment clarified the relationship between GSFS and Government entities as related persons under the GST Acts. Additionally, it determined that GST would not be chargeable on notional processing fees provided by GSFS to Gujarat state owned entities, given that the consideration is solely based on interest in compliance with the relevant notifications exempting such services from GST.

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